Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday evening.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue forecasts for Google, attributing this to the integration of the Gemini AI into Google Cloud and the AI Overviews feature in Google Search. They believe that these enhancements will lead to increased sales.
In their report, Post and Bansal expressed optimism about the growing integration of AI within Google’s services, suggesting that a wider implementation of AI Overviews will stimulate greater activity in the core Search segment. This positive outlook persists despite initial challenges encountered during the launch of AI Overviews, which were met with online criticism due to inaccuracies. They have increased their price target for Google shares from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, largely thanks to its AI developments, which propelled its stock price and market capitalization beyond $2 trillion, joining giants like Apple, Microsoft, and Nvidia.
The strong performance in the first quarter followed several new artificial intelligence product launches under the Gemini AI initiative. At the recent Google I/O developer conference, the company introduced an advanced AI assistant capable of interacting through smart glasses. Google claims that its latest Gemini AI model operates 20% faster than the newest version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding the impact of AI Overviews, he noted that it could contribute positively to Search monetization over time. He mentioned that AI is already having a favorable effect on Google Cloud services and anticipates a 27% increase in Cloud revenue compared to last year.
J.P. Morgan analyst Doug Anmuth shared a similar optimistic view, designating Google as one of the firm’s top technology stocks, alongside Uber and Amazon, and showing enthusiasm for the advancements in generative AI in advance of Alphabet’s earnings report. However, Raymond James analyst Josh Beck pointed out that while the current outlook on AI is positive, the long-term impact of AI on Google’s sales remains uncertain.